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Here is the problem with all economic analysis - data
revisions. Each month economists, analysts and the media
work off reported numbers to make assumptions about the
economy. However, the problem is that most of the
assumptions made generally wind up being wrong when the data is
revised. This is one reason why predicting recessions is
so difficult. Currently, there are many that foresee
"no recession" in the coming months and that may well
be the case. However, as
I have discussed previously, the problem that exists for
me, any other student of the economy, is that we are all
working with lagging data that continues to be revised at much
later dates. Waiting on these data revisions is
specifically why the National Bureau of Economic Research's
(NBER), who officially dates recessions in the U.S.,
announcements are always months after the recession actually
started.

This week the Philadelphia Federal Reserve
issued their revisions to the widely followed Philadelphia
Federal Reserve Survey for 2012. The chart below shows
the difference to the "Current General Activity"
portion of the survey which is what is reported by the media.

What is important to notice is that the survey overstated both
strength and weakness in the survey all year long.
However, the deterioration in the subcomponents was just
as notable particularly in the areas that most directly affect
employment - backlogs, and new orders.

Furthermore, future expectations have been sharply declining
since September. The outlook for overall activity, new
orders, shipments, backlogs, and employment have all been
negatively impacted since the election. While future
expectations of capital expenditures have risen during the last
quarter this is most likely a function of plans to increase
productivity to preserve compressing profit margins.

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Regardless, there are few relative positives and the revisions
in the data for 2012 showed a much weaker environment than
previously believed. In the coming months ahead we will
get the annual revisions to incomes, spending, and employment
which are all primary constituents of the GDP calculation and
the determination of a recession. While I currently do
not expect a recession in the near term we cannot rule out the
possibility of one later in 2013 due to higher taxes and
potentially larger than expected cuts in spending. We
remain conservatively invested until we are past the debt
ceiling debate and have more clarity on the direction and trend
of the markets.